The following addresses only marketing to professional investors in Finland. Marketing to non-professional investors is subject to certain additional rules (which are not entirely clear with respect to marketing by non-Finnish sub-threshold AIFMs).
An EEA sub-threshold AIFM, which is subject to domestic registration in its home member state, can market its fund to professional investors in Finland subject to a notification procedure with the Finnish Financial Supervisory Authority ("FIN-FSA"). Although not evident in the Finnish Alternative Investment Fund Managers' Act (162/2014, as amended; the "AIFMA"), the FIN-FSA has taken the view that the AIFM may start marketing only after having received the approval of the FIN-FSA.
The concept of 'marketing' has not been clearly defined in the AIFMA. Based on the preparatory works of the AIFMA, the concept of marketing is, however, more restricted than certain other laws.
For example, mere "soft circling" (=generally inquiring willingness to make investments in certain kinds of instruments) is not to be considered as marketing. The same applies to road shows unless specified offers for issuing/subscribing interests in specified funds are being made. Presenting merely general terms on typical fund terms is not marketing.
Furthermore, the governmental bill relating to the AIFMA states more specifically that delivering "offering documents" on an AIF which is already managed by the AIFM is regarded as negotiating the terms of investment which is an activity requiring marketing notification (= constitutes marketing). Note that the term "offering documents" is not defined. As a private placement memorandum (PPM) may be generally seen as an "offering document", this could mean that circulating a final PPM on a fund that is already managed constitutes marketing (and therefore could not be done prior to obtaining the marketing approval). It seems fairly safe to circulate softer "teaser" materials and engage in discussions so that no formal investment commitment is sought. Delivering subscription agreements (and possibly also delivering other fund agreements) relating to a fund that has already been established could be interpreted to mean that investment commitments are sought.
On the other hand, the governmental bill states that delivering agreements/documents on a fund that has not yet been formed does not require complying with the marketing provisions (=does not constitute marketing); however when a binding investment commitment is made, then the fund manager has to be able to show that it has complied with the related obligations and made an appropriate notification on starting the marketing. Especially in the case of funds that have not been formed yet, the threshold of "marketing" is thus set relatively high. Accordingly, if the fund has not been formed and the documentation is still drafts that are being negotiated, the fund manager may circulate almost any documentation without triggering the "marketing" threshold as long as it is not asking for formal investment commitments. However, usually it is recommended not to circulate subscription agreements, not even in draft form.
No license or registration is needed in Finland, but a notification has to be filed with the FIN-FSA and marketing may only commence after the receipt of its approval, and the AIFM is required to comply with certain provisions of the AIFMA as described below - and not only in connection with the marketing phase but also thereafter. There is currently no prescribed form of notification available and the notification is, accordingly, to be made in free form. Furthermore, there is no requirement to appoint a local depositary, paying agent or similar. Such a notification would generally speaking include:
Further, according to the AIFMA the AIFM shall provide in its notification the FIN-FSA with a confirmation concerning compliance with obligations relating to:
There is a one-time fee of EUR 1,100; no annual fees will need to be paid. Legal fees range between EUR 3,500 – 5,000 (plus VAT if applicable) depending on the amount of input required from the Client and how the process with the FIN-FSA goes.
In terms of timing, there are no official time limits set for the FIN-FSA to grant the marketing approval (nor is there a backstop date), but in practice it has usually taken some two months to get the marketing approval, although there have seen shorter (and longer) processing times depending on the workload of the FIN-FSA.
Once the FIN-FSA has granted a marketing approval for the AIFM, the name and contact information (address) of the AIFM will be included in a public register maintained on the FIN-FSA's website. The register also includes information on the AIFs which the AIFM is allowed to market in Finland.
The following ongoing obligations apply:
Please note that there is no concept of „pre-marketing", but the question is rather simply what actions may be taken without them be deemed as „marketing". Pre-marketing is also possible even after the AIF has been legally established (and the marketing notification may be submitted prior to or after the AIF has been legally established), but this may affect the interpretation on whether the taken action constitutes marketing (see above).
There is no clear distinction between marketing and pre-marketing and there is, consequently, a lot of grey area, which means that caution must be exercised when promoting funds that have not yet been notified for marketing in Finland. It is often unclear whether a specified action typically taken during a fundraising process should be interpreted as marketing or not (see above). Based on the preparatory materials relating to the AIFMA, the following activities would not meet the threshold for marketing and would therefore qualify as pre-marketing:
In addition, a fund manager providing a draft private placement memorandum or similar formal offering document in relation to a fund that has not yet formed and the terms of which are still being negotiated should not be seen as marketing. However; if the fund already exists, this would likely be seen as marketing.
As long as no investment advice or other MiFID investment services are rendered to Finnish investors (like reception and transmission of orders in relation to financial instruments, portfolio management or underwriting of financial instruments), no MiFID license is required. Customary fund marketing measures (by the AIFM) are not known to have been interpreted as falling under the scope of MiFID licensing requirement. With respect to placement agents, there is no formal guidance available, and what action constitutes investment advice or transmission of orders remains unclear. Generally speaking, it may be recommendable for an agent to limit its role to introductions and in any event not to receive/forward any subscription agreements (but to arrange it so that the investors send the subscription documents directly to the AIFM). As regards multiple funds versus one fund, it may also be easier to argue that marketing the fund of a single product AIFM is more clearly simply "marketing", whereas marketing only selected funds of a multi-fund manager could be more likely to be seen as "investment advice".
A typical fundraising deck (information about the fund, portfolio companies in previous fund, exit scenarios, team description), short term sheet and/or general marketing material would, generally speaking, be seen as low-risk preliminary information. The evaluation would be different in the event that the fund has been established (and held a closing) and if the material comprises documentation that may be interpreted as „an offering document".
Pre-marketing (i.e. any activity that does not yet constitute „marketing" as meant in the AIFMA) has not been regulated as such in Finland which means that the pre-marketing activities have to be assessed based on the definition of the marketing in AIFMA and its government bill as described above. In the current state, as long as the pre-marketing activities do not constitute marketing, there are no specific requirements or procedures to take into account prior to engaging in pre-marketing activities.
However, this will change in the near future since the directive (2019/1160/EU) amending the AIFMD (2011/61/EU) has been adopted on 20 June 2019. These changes will affect the marketing of AIFs and must be implemented by Member States by 2 August 2021. The Finnish government has not yet proposed a bill for implementing the directive.
The concept of reverse solicitation is recognised in Finland (although not exactly defined). Reverse solicitation is permitted and does not trigger the licensing/notification requirements. Material distributed solely at the genuine initial request by a potential investor, i.e. on a genuine reverse solicitation basis, is not considered to constitute marketing in Finland. If an offering or placement of units or shares of the fund to an investor is made at the genuine initiative of the investor, no Finnish FSA notification is required.
However, the requirement of making certain information available to the investors has to be fulfilled by the AIFM prior to the investor investing in the fund (such disclosure obligation is based on Article 23 AIFMD and the information supplied to the investors shall include the regulatory disclosures as set out in the aforementioned Article). However, a professional investor may waive in writing the right to receive such regulatory disclosures.
While there are no other regulations than the disclosure obligation in the AIFMA (which is based on Article 23 AIFMD), it is generally recommended that there is some documentation on any reverse solicitation by an investor for evidentiary purposes.
Also, the AIFM has to comply with good securities market practice and is prohibited to give false or misleading information about the AIF under the AIFMA. Any information, which only after being given to the investor, is found false or misleading, shall be corrected without undue delay. A likely interpretation is that any pre-marketing activities of an AIF will result in that reverse solicitation will no longer be available with regard to the potential investors to whom pre-marketing was targeted.
The information in our toolbox provides managers of private equity or venture capital funds with an initial overview of certain framework conditions in the respective country. It does not provide advice on the law of any country, neither does it substitute such advice. The above information reflects the legal situation as of February 10, 2020. Before marketing a fund into the respective country, it is at all times necessary to seek expert advice. Our team is happy to assist you with all questions at any time.